Eutility's weekly news

Second regulator calls for power market reforms

Second regulator calls for power market reforms

A second regulator in as many days has voiced concerns about changes to the electricity market, with the Australian Energy Market Operator arguing
for an overha

A second regulator in as many days has voiced concerns about changes to the electricity market, with the Australian Energy Market Operator arguing
for an overhaul of the rules on how generators are paid and the creation of a permanent strategic reserve to guard against market failures.

AEMO said a market redesign was needed to deal with the growing use of renewable energy — including the fast-growing adoption of rooftop
solar panels — and the retirement of coal-fired power stations.

In a report yesterday AEMO said the existing structure was outdated and did not allow for different types of generation to be paid for services
such as stability and fast response, rather than just generation.

It is the second of Australia’s three main energy regulators this week to raise concerns about changes in the electricity market, after the Australian
Energy Markets Commission said this week that the rise of renewables had made the market more unstable and less secure.

It has called for a new “operational reliability standard” that allows a level of reserves to manage power system reliability during extreme conditions,
a strategic reserve that sits outside the market and improved mechanisms to value and pay for reliability and flexibility.

The reports have sparked a growing debate among the energy regulators about the need to secure the system through intervention in the market and
the cost to consumers of providing that certainty.

AEMO said the market was designed around real-time spot energy markets and bilateral contracts that had worked well when there were traditional
patterns of electricity generation and consumption. But there were questions over whether it was enough to meet “optimal economic outcomes
for consumers and investors” in the future.

“Based on recent experience operating the markets, AEMO believes this is no longer the case and appropriate adjustments must be made,” it said in a
report on the operational and market challenges to reliability and security of the electricity market.